How much will my insurance go up after an accident?

When shopping for car insurance, drivers choose mainly based on price, service and reputation. But one element that's often overlooked is a company's "surcharge schedule" — a predetermined premium increase that's charged if you cause a car accident.

Let's say you had a spotless driving record for the past 15 years. Last month you caused an accident. Now there's a claim on your car insurance in order to pay for damages. You suspect your rates will go up at renewal time, but what's a standard increase after just one accident?

Car insurance companies are required to file rates with each state insurance department where they operate, and included in that is how they're going to determine rates after a claim is made. In some states, insurance companies are legally required to give you a copy of the "surcharge schedule." However, trying to read these schedules can make your head spin.

"They make it extremely difficult to read," Giancola says.

The surcharge schedule lists points and percentages and you often have to do your own math to figure how much of an increase you would pay percentage-wise. But it may be worth the headache because the car insurance rate differences can be significant.

Just how much does car insurance go up after an accident?

Many car insurance companies follow the Insurance Services Office's (ISO) standard of increasing a premium by 20 to 40 percent of the insurer's base rate (which is the average rate charged in the state before discounts and other adjustments, plus the insurance company's claims-processing fee). According to the ISO, for multicar policies the surcharge is 20 percent of the base rate for the first two vehicles on the policy, and 40 percent for a single-car policy.

For example, say you insure two cars at a premium of $300 each and the insurer's base rate is $400. After an accident, you may get a surcharge of $80 (20 percent of $400) on both, so your total surcharge would be $160 — an increase of about 27 percent on the policy.

But many insurers operate with their own surcharge ideas — some higher and some lower.

According to a 2008 surcharge schedule from State Farm, for example, if you had an accident within the first 12 months of your policy period, your base rate would increase by 10 percent after the first accident (and another 45 percent after the second). In the same scenario, a person insured with Progressive who is between the ages of 25 to 44, would see a 29.5 percent increase on his policy after the first accident (56.2 percent for the second), according to the company's 2002 surcharge schedule. A 2005 AAA Auto Club surcharge schedule shows an increase of 30 percent for the first accident and 150 percent for the second major accident. (Insurance companies do not file new surcharge schedules each year. A new schedule is filed only when an insurance company wants to increase or decrease its rate. But it's rare that an insurer would file to decrease, says Giancola.)

While a car insurance policy may look like a bargain initially, a high surcharge level could send your rate through the roof after an accident. "Some companies offer cheaper policies, but God forbid you have an accident," Giancola says.

Surcharges vary by state and insurance company, and some penalize you for moving violations while others focus only on "chargeable accidents" (meaning at-fault accidents for which your insurance company must pay out more than $500 or $750 per accident after your deductible has been applied).

If you're shopping for a car insurance policy, Giancola recommends that you ask an insurance company for a copy of its surcharge schedule (sometimes called an "insurance point plan") before you buy. Also, ask this question: "If I have an accident within the next 12 months, what would my end result premium be without discounts?"

While individual insurers can choose differently, ISO does not recommend a surcharge on "property damage only" accidents where the damage is under $1,000. Also, if the accident is caused by a new driver (driving less than two years) who already receives a surcharge for being inexperienced, there should be no additional surcharge for his first accident. There are also state exceptions to surcharges.

Also, some insurance companies will not figure your increase based on their base rate, but rather on what you were paying before the accident. Keep in mind that your location, age and driving record, as well as the "loss experience" (meaning claims made) of drivers similar to you affect the percentage increase of your insurance premium.

Most companies try to remove the rating variables that might skew your premium increase related to "loss experience." For example, if you live in a state in which the majority of your insurance company's customers live in urban areas, but you live in a rural area, you don't want your premium increase to reflect the claims of urban motorists. Likewise, if your insurance company happens to insure more youthful drivers than middle-aged drivers, and you're middle-aged, you don't want your rate increase to be affected by those higher-risk, higher-charged, younger drivers.

By factoring out drivers who aren't in your age group and drivers who don't live in your area, insurance companies say they can derive an equitable increase in your premium.

Rate increases not exactly a science

You might find yourself getting double- or triple-whammied by your individual circumstances. For example, if you make a claim and have a birthday before renewal time, your birthday might bump you into a higher risk category along with the claim, shooting your rate through the roof.

Or, if you've made a claim and bought a more expensive car before renewal time, you'll likely see a significant increase — perhaps as much as 100 percent.

Remember, too, that circumstances can work in your favor at times. If you turn 40 and enter a lower-risk category, or if you buy a car that's less expensive to insure, your savings might help offset any increase due to an accident.

The unforgiven

Some car insurance companies give their customers a one-time "get out of jail free" pass. When you make a claim on your first at-fault accident, you might not see any increase in your premium at renewal time. This practice — sometimes known as "accident forgiveness" — is not industry-wide, so if your insurance company holds your rate steady, consider yourself lucky.

Companies that forgive first-time accidents often require that you fit a certain profile in order to escape a rate increase.

For example, State Farm Insurance Co. increases your premium for any "chargeable" accident — meaning any accident in which the company pays more than $750 in liability and collision claims combined. Its policyholders should expect to see the increase at renewal time on their liability, collision, and PIP or medical payments coverages. But State Farm also has a program called "forgive the first accident" for its policyholders who have been with the company, accident-free, for at least nine years. If you fit this description and have a chargeable accident, you won't see any increase in your premium.

USAA members in 43 states and Washington, D.C., who keep an accident-free record for at least five years will receive a surcharge waiver for one at-fault accident per policy. If you haven't been with the company that long, you can still buy accident forgiveness: For a few dollars extra a month, USAA lets you purchase an endorsement that forgives one at-fault accident. This endorsement is currently available in 17 states.

When you're shopping for insurance, it's a good idea to ask whether the insurer offers first-time accident forgiveness. It might save you a lot of money on your car insurance over the long haul.

If you're slapped with a surcharge, it does not last forever. Your surcharge will drop off after a determined length of time, which varies by state. For example, if you live in Minnesota, you're surcharged for 3 years, Giancola says. If you don't have another accident within those three years, your premium will drop back down. If you get hit by a surcharge, ask your agent how long it will last.